United States v. Univis Lens Co.

• Decision Date: 10 February 1950
• Citation: 88 F. Supp. 809
• Parties: UNITED STATES v. UNIVIS LENS CO. et al.
• Court: U.S. District Court — Southern District of New York

88 F. Supp. 809

UNITED STATES v. UNIVIS LENS CO. et al.

United States District Court S. D. New York.

February 10, 1950.

Melville C. Williams, Malcolm A. Hoffmann, Special Assistants to the Attorney General, John R. Niesley, Trial Attorney, Great Neck, N.Y., for petitioner.

Cravath, Swaine & Moore, New York City, Alfred McCormack, New York City, Francis Dean Schnacke, Dayton, Ohio, Albert Rosenblum, New York City, of counsel, for respondents.

GALSTON, District Judge.

It is charged by the petitioner that the respondents have violated the Final Judgment entered in this court on September 28, 1942, in an action wherein The Univis Lens Company (hereinafter referred to as Univis) and others were adjudged to have violated sections 1 and 3 of the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1, 3. The Government filed its petition in procuring an order to show cause why the respondents should not be adjudged and held in criminal and civil contempt on the ground that since the early part of October 1942 they combined and conspired with wholesale customers of Univis to fix and influence and attempt to fix and influence the sale prices of prescription lenses; and secondly on the ground that since the early part of October 1942, Univis and Marks combined and conspired with wholesale customers to fix and influence and attempt to fix and influence the sales prices of lens blanks in violation of injunctive provisions embodied in the Final Judgment entered in this court on September 28, 1942.

The individual respondent Marks was not a defendant in the original suit. However, it was stipulated that he has full knowledge of the provisions of the Final Judgment; that he had been an employee of Univis from some time prior to 1941 to October 1949; that he was Vice President in Charge of Sales from October 28, 1944, and that since October 1949 he has been a director of Univis and is employed as a consultant by Univis on a part time basis.

It will be helpful briefly to review the earlier proceeding. The Final Judgment entered was in conformity with the Supreme Court's opinion, 316 U.S. 241, 62 S.Ct. 1088, 86 L.Ed. 1408, reviewing D.C., 41 F.Supp. 258. It was charged that the defendants had unlawfully conspired to "fix uniform, arbitrary and unreasonable prices at which (the company's) wholesalers and retailers" could resell bifocal lenses, and had unlawfully conspired to use the patents of the defendant Univis Corporation to set up a licensing scheme which would give the defendants complete control of all phases of the marketing of Univis bifocal lenses, including "the fixing and maintenance of minimum resale prices of such lenses".

The Final Judgment decreed that the defendants had violated sections 1 and 3 of the Sherman Act, "by fixing the price and terms and conditions of sale at which wholesaler distributor licensees and grinding and finishing retail licensees shall sell lenses or lens blanks, by entering into the license agreements with jobbers, distributors, wholesalers and retailers as set forth in the Complaint and therein or in any manner fixing or controlling directly or indirectly the resale prices or terms or conditions of sale at which such licensees shall sell lenses or lens blanks * * *." and the defendants were enjoined "From entering into any combination or conspiracy similar in effect or purpose with the agreements or arrangements herein declared illegal among themselves or with others in order to fix or influence or attempt to fix or influence the prices or terms and conditions of sale to be charged for lenses or lens blanks, * * *."

Those provisions the Government now contends have been wilfully violated by the respondents.

To support the allegations of the petition, the Government introduced correspondence from the files of the respondents consisting of requests by customers for copies of Univis factory lens price lists and for suggestions regarding mark-up prices on lens blanks, together with the replies of the respondents to such inquiries. Also ten wholesale customers of Univis having places of business in various regions of the United States were called to testify. The evidence thus presented by the Government, as it concedes, is of such nature that "the areas of conflict of fact are small, and the real controversy is as to the inferences to be drawn from respondents' course of conduct and its significance in law."

A conspiracy connotes concerted action under a common design to attain a common purpose. It may be to accomplish an unlawful end, or by employing unlawful means to accomplish a lawful end. In the matter at hand the Government urges an illegal purpose, i. e. of controlling prices in violation of the Final Judgment.

Certainly it is not sufficient to establish a conspiracy between the respondents and their wholesale customers to show that the respondents had knowledge that some of those customers were desirous of using Univis price lists as their own in respect to prescription lenses or of obtaining a mark-up price for lens blanks. To establish the criminal conspiracy, it was incumbent on the Government to prove an intent on the part of the respondents to further, promote and cooperate in those objects in violation of the Final Judgment, see Direct Sales Co. v. United States, 319 U.S. 703, at page 713, 63 S.Ct. 1265, 87 L. Ed. 1674. It was there said that more than suspicion or knowledge is required to disclose a conspiracy; informed and interested cooperation, stimulation, instigation should be established by the Government. As will appear later in this opinion, the inquiries made by the customers were always of their own initiative and never inspired or stimulated, so far as the evidence discloses, by the respondents.

The Government does not assert the existence of any conspiracy among the customers of Univis themselves, nor indeed between the customers and any third persons. The Government's position is that an agreement or conspiracy between Univis and its wholesale customers may be inferred from these circumstances: (1) the distribution of prescription price lists in greater numbers than were needed by the wholesalers for the purpose of placing orders with the Univis factory prescription department; (2) that Univis prescription price lists did not reflect a ten per cent discount given by Univis to all of its customers upon orders for prescription lenses placed with its prescription department; (3) that when inquiries were received from its customers as to what mark-up was proper upon lens blanks, the respondents did not limit their replies to a statement that Univis was not permitted to fix any price, but went on to inform such inquiring customers of mark-ups generally obtained by their jobbers; and finally that all of the acts of the respondents must be interpreted in the light of the background of the case, i. e. the unlawful patent licensing distribution system of Univis, which brought about the institution of the antitrust suit and the Final Judgment.

The main business of Univis consists in selling lens blanks to wholesale dealers in the optical business who grind such lens blanks in accordance with prescriptions for use in eyeglasses, or who resell such lens blanks to others including wholesalers, opthalmologists, opticians and optometrists, who then grind such blanks to prescription. Univis itself also conducts at its factory a prescription department and has done so from the beginning of its business.

Prior to the judgment of September 28, 1942, the unlawful practice of the defendants consisted in restricting the sale of lens blanks to their licensees, the wholesale dealers, and fixing the resale price of the finished product. Moreover the retailers for whom Univis ground prescription lenses were required to sell Univis lenses at minimum prices fixed by the defendants.

After the licenses had been cancelled, following the entry of the judgment, Univis sent to its customers a new price list entitled "Univis Factory Prescription Price List". This list bore the legend, "The prices listed are for lenses ground to prescription in the factory of the Univis Lens Company, Dayton, Ohio". At the same time Univis notified its customers by letter that the lists were not to be used as a suggestion or direction of prices. The Government's brief asserts that had "the wholesalers and Univis accepted the face value of these declarations as guides to their further conduct, these proceedings would not have been instituted."

The Government sought to prove that the respondents and the wholesalers did not adhere to the declarations made by Univis in the letter of October 12, 1942.

Some of the Government witnesses though did testify that they followed the Univis prescription price lists. But they made it clear that they felt perfectly free to deviate from the prices on the lists, and in fact did so on their own volition. In every instance where there was correspondence, whether in reference to resale prices of prescription lenses or lens blanks, it appears that such correspondence was initiated not by the respondents but by the wholesalers. In the replies the respondents were careful to point out that they did not fix or suggest any resale prices.

What these companies did, as related by their representatives, completely fails to prove the alleged conspiracy between Univis and its customers. There is no direct evidence of an agreement, illicit or otherwise, between the respondents and their customers to control prices. There was no showing that Univis would cut off the sale of its products to customers who departed from the prices listed, or impose any other penalty. Contrariwise, the affirmative evidence discloses that Univis was not willing to provide copies of its price lists in the numbers requested. Only sufficient numbers of such price lists were forwarded to meet the organization requirements of its customers.

To grant the relief sought in this present proceeding would be to extend or...